Rants and raves about the mess of higher education in the United States.

Sunday, October 21, 2018

Student Loan Default Problem Worse Than Thought (No Kidding!)

By Professor Doom

Student loan debt
is around $1.5 trillion. Theoretically, the size of a loan isn’t nearly as
important as the ability to pay back the loan. Alas, most of this loan debt was
for fake education; when I first started this blog I covered in detail how fraudulent
much of the education in higher education is, by publishing everything in my book
on the subject (this basically the first two years of my blog posts). For
the bulk of students with student loans, it is mathematically impossible to pay
off their debts, because they were given bogus educations of no value.

When students
default, things get worse: the debts simply get larger. You can’t escape
student debt through bankruptcy. So, if you default, the debt increases, and
obviously you can’t pay the larger debt either…it’s a death spiral.

I’ve maintained
the true default rate is far higher than what is claimed (“around 2%”). The
reason for the deception is the vast array of programs which cover up the
defaults, as well as schools using accounting tricks. I’ve been saying this
obvious fact for years, but a recent article concedes that, yeah, something is
very wrong with student debt:

--sorry to
cite something so disreputable, but backtracking the data shows it’s valid.

Let’s just get
right to a picture, and then I’ll put in an extra thousand words:

Gosh, from 2.1% to 13.1%...and this is
labeled “opinion.” This rise isn’t as sharp as it seems, since that 2.1% was a
grotesque under-estimation; it was always higher than that. I maintain that
13.1% is likely a bad under-estimation, albeit not as bad as 2.1%

Of borrowers who started repaying in 2012, just over 10
percent had defaulted three years later. That’s not too bad — but it’s not the
whole story. Federal data never before released shows that the default rate
continued climbing to 16 percent over the next two years, after official
tracking ended, meaning more than 841,000 borrowers were in default. Nearly as
many were severely delinquent or not repaying their loans (for reasons besides
going back to school or being in the military). The share of students facing
serious struggles rose to 30 percent over all.

So the default rate, terrible for kids
right out of school, only gets more horrible as the years go by. Again, this
isn’t shocking news: you start out strapped for cash when you leave school, but
can maybe get help from friends/family to keep you going for a little while.
Eventually you can’t keep asking for bailouts from everyone around you, or you
lose your job for a month, or get sick, or have a child, or worse a sick child…and
then the death spiral begins.

The new data makes clear that the federal government
overlooks early warning signs by focusing solely on default rates over the
first three years of repayment.

Yeah, no kidding.
Like all official numbers, what we are getting from the government is just more
lies. Someone else decided to show in detail that things are much worse than
“we” thought.

The
secret to avoiding accountability? Colleges are aggressively pushing borrowers
to use repayment options known as deferments or forbearances that allow borrowers to
stop their payments without going into delinquency or defaulting. Nearly 20
percent of borrowers at schools that had high default rates at year five but
not at year three used one of these payment-pausing options.

I’m shocked,
shocked, to read of this. About the only people who would not be shocked are
those who started reading my blog years ago.

The federal government cannot keep turning a blind eye while
almost one-third of student loan borrowers struggle.

"Two years later, after the Department
of Education stopped tracking results, 636 schools had high default
rates." Who are their accreditors, I wonder?

Accreditation, as
I discussed in detail in my book (and on my
blog), does not care about student loans, and further analysis on
my part reveals how they are in on the massive fraud being enacted on our next
generation.

So a question
about the accreditors should, by the knowledgeable, be met with mirth, but even
on a specialized site like inside Higher Ed, none of the academics there know
just what a huge fraud accreditation is, to the point that asking about them
generates no informed responses.

In any event, the
reality is our student loan defaults are sharply rising, and I promise the
gentle reader, they will rise further. I don’t ask you to believe me, of
course, but if I happen to be around in a few years, I’ll be happy to show the
confirmation.

Even if, as I
often beg, we stop the student loan scam immediately and in its entirety, the
default rates will still rise for a decade or more, because these debts never
clear. The government will do nothing for them as yet, but I hope that someday
the warning signs will be large enough for our bloated government/country to
recognize. I still, of course, advocate for the end of the student loan scam.
Isn’t destroying one generation enough?